My boyfriend is planning on moving in with me this summer. This is a house that I bought five years ago, and I can’t figure out what would be a fair financial arrangement. Since I’ve put thousands of dollars down on this house, it doesn’t seem fair to just add him to the title and split everything 50/50. But if it’s only my name on the title, then it doesn’t seem fair to ask him to contribute as much as I do, given that I’m the only one building up equity in the house. I don’t think he’s in a secure enough financial position to “buy in,” and since he already sleeps here and has some of his stuff here, it’ll be a good deal simpler for him to move in, as opposed to us both moving out and getting a new place together.
Any recommendations?
ETA: I suppose it’s also relevant to mention that our incomes aren’t drastically different, but they’re not equal, either. He makes approximately 3/4 of what I make in a year.
When I moved in with my gf >15 years ago I had concerns about selling my house and then being screwed if our relationship failed. She offered to put me on the deed (no mortgage), but that didn’t feel right.
Then she pointed out that she was going to get a new roof for the house. I offered to pay for it, new windows/siding, and an extension of the roof to cover a porch. The work was done and I paid for it. It felt like “our house” after.
Then we looked at the household bills. She got out her electric bills for the year before I moved in and we compared them with the electric bills after I moved in. The thing is, she always left everything on, while I turn out lights when I leave a room. The electric bill actually went down after I moved in.
Instead of dividing up bills she suggested that she just continue paying the necessities (food, electricity, gas) and I would pay for extravagances (restaurants, vacations). This has worked out great, since we can really go all-out with the fun stuff.
Yeah, he and I both went through divorces recently, where we had to figure out new living and financial arrangements, so I’m sure we’re both feeling a bit more cautious about completely merging everything and leaving no escape route after those experiences.
We initially considered the idea of me paying the mortgage, and him paying for other expenses like electric, water, and Internet. But from some rough mental math estimates, I think that’d equal out to me footing roughly 80% of the bill for living here. While I don’t know what exactly WOULD be fair, I don’t think that’s it. (Right?)
How much equity do you have in the house? Putting him on the title essentially splits the existing equity with him. One thing that might be fair is that he pays you “rent” until his contribution equals 1/2 the equity. That way you’re not just splitting the existing equity with him on the first day.
Charge him room and board. That should be half your mortgage payment, plus taxes if not included, half the utilities, and some amount you can agree on to cover food and dry goods. Then work out some kind of service fee, not monetary though, {wink wink}*.
The equity would be the difference between what is left on the mortgage and what the house is worth. For example, if the house would sell today for $200k and you owe $150k on the mortgage, the equity is the $50k difference. It’s essentially the profit you would make if you sold the house and paid off the mortgage. If you put him on the title today, it would be like splitting the $50k with him, since if you sell the house, he would be entitled to half the profit. So if you have him pay $1000/mo for 25 months, he has paid for 1/2 the existing equity and it would be a fair split of the profit if the house was sold.
I would charge him rent and half the utilities. I would also write up some kind of agreement and email it to each other. We did something like this when my wife and I moved in together.
Okay, that’s what I thought, but I wanted to make sure before I answered. According to the estimate on Redfin (which I am using because it is lower than the ones on Zillow and realtor.com, so it’s the most conservative estimate), my equity is 140k. So your idea might take a while.
I think it will be different for each circumstance. When we first met, she told me she worked in advertising. I thought she was a secretary, and assumed I made more money than she did. Later I learned she was a VP in a big agency and made 3x what I made.
The thing is, we both see ourselves being together forever. Money is the least of our concerns.
I would definitely keep him off the deed. I’m assuming it would be a joint tenancy and depending on your jurisdiction it means you would need his permission to sell your house. At least in my state there are two options - in common meaning you just gave him half of your house, or with survivorship meaning it would go to him without passing through probate. Are either of those options what you want?
You don’t mention your age so I don’t know if you are a doe-eyed 22-year-old or an experienced 50-year-old. You also don’t mention how long you’ve been in this relationship and how secure you feel about it.
Is this a step towards a lifelong commitment, or is it just convenient? Suppose you didn’t already own your own house. Would you and your boyfriend be buying a house together?
I would definitely not add him to the title if he is not buying in. I think that would also require new financing.
I would have him pay you rent based on the current market rental rates in your area. (Your mortgage payment has nothing to do with what the rent should be.) He should also pay half the utilities. He should not have to pay for maintenance and repair costs or property taxes, since that would be covered in the rent. He would be paying the same as if the two of you decided to rent the same house together. If you end up getting married or deciding to otherwise merge finances and add him to the title, then all the rent he paid will come back in the form of joint assets anyway. OTOH, if the relationship ends, then you’re both square at least financially–he got a place to live at a fair price.
YMMV. In my state the owner would file a quit-claim to convert it into JT with right of survivorship since (I believe) it is considered estate planning. No refi necessary.
I am in my mid-thirties, and I have been in this relationship for a year. I would consider this a matter of convenience as opposed to a lifelong commitment. If I were a “doe-eyed 22-year-old” (to borrow your term), I would probably consider this a lifelong commitment. But a couple years post-divorce, the whole concept of committing to someone for life is not something I’m yet comfortable with.
When my late spouse first moved in with me we were still girlfriend/boyfriend. We split expenses down the middle and kept our finances separate not just then but into the first 10 years of our marriage. It’s perfectly valid for one party to keep discreet ownership over a large asset for long periods of time. The hitch might come years down the line, but I’ll address that in a bit.
Right now, even if your incomes are similar, you are bringing a very large asset to the relationship. I would not suggest putting him on the title at this point. Even if you do marry down the road you might want something in writing stating that you own a larger share in the house then he does, or making it explicit this was not shared property.
There has already been a suggestion to charge him “rent” of a sort. You can even make it explicit if you want to and you might even want to do that for the following reason: what happens to him if something happens to you? No one wants to think about these things, but having an actual lease gives him some rights to live in your home for a period of time, time in which, if he had to do so, he could look for a new home and move out in less than emergency speed even if he has no legal claim to owning a piece of the house.
I’ve seen situations in which the girlfriend/boyfriend is locked out of the house after a death or incapacitating injury/illness, with no legal recourse, and in one case losing all of her possessions because the other party’s family were complete and utter dickheads. As a guest your boyfriend has no rights. As a renter he does - this will vary from jurisdiction to jurisdiction and it will probably cost a couple hundred to get that drawn up and properly done.
That might, however, complicate things in the event of a breakup.
If you do go that route you will want a document in writing and to consult a lawyer. That doesn’t necessarily mean thousands of dollars. You will want something legally valid for your jurisdiction.
A lawyer might be a good person to consult to lay out legal pros and cons of any arrangement you come to, and to make sure that any required documents protect the rights of those involved. I say this not form the standpoint you’ll hurt each other, the problem is what other people - your families, the bank, whatever - might do to the other party down the road.
Remember - if his name is on the title he, too, is responsible for the debt. Does he want to take on half a mortgage? Is he financially prepared to do so? Would it be better for him to build up good credit for couple years (just spitballing) and see where this relationship goes before the two of you make that commitment?
Some other folks have talked about using the need for major repairs as an opportunity to “buy-in” the house. If his finances are currently a bit shaky maybe put part of the money he contributes every month into a specific account - if repairs are needed he will then be in a position to pay for them. If you break up he’ll have a nest-egg to go elsewhere. Just throwing out ideas here.
My opinion - which may or may not work for you, or be in the majority - would be to sent up a renting/lease situation that clearly spells out everyone’s obligations and responsibility for the next year and then re-evaluate. But that’s me. YMMV
Since this is a private arrangement between the two of you, you are in no way obligated to charge “market rate”. You can go higher or lower, as the two of you chose. Half the mortgage cost? 40%? 30% and all utilities and you cover 70% of mortgage costs? You get to choose. I assume you’re not looking to profit off him so a 50/50 split of monthly costs will be (should be) less than the market rate for rent in your area.
Or you can just charge market rate. It really is up to the two of you.
I wouldn’t put anyone of the deed that didn’t pay for the house. I owned a condo separately from my wife for the first 5 years of our marriage and when I sold it I rolled it’s profit into a house my wife bought and then she quit claimed me onto the deed.
When we were just dating she lived in my house rent free but we got a joint bank account once we were engaged that we both had our paychecks direct deposited in and the mortgage was paid out off so at that point she was paying rent in proportion to our salaries.
If I was charging rent it would be 50% of the mortgage and 50% of the utilities and if they wanted to buy into the house to get their name on the deed I’d add 1/288th (assuming you’ve got 20% equity if it’s different the math would change so they were equal partners at the time of pay off) of the equity on to their half of the mortgage each month and at some agreed on point maybe 10 years in the future I’d add them to the deed. Their extra payments should go to pay down the mortgage faster.